Here in Charlottesville, the University of Virginia has a tradition of painting and repainting Beta Bridge whenever students want to promote a message. Over the decades, paint layers build up into a massive crust that clings to the bridge. It’s a fun local landmark, but that layering strategy should not be applied to the legal rules we create to allow people to invest in startups.
You’ve got all of this, right?
For the last 85 years, Congress and the Securities and Exchange Commission (SEC) have been slapping on more paint every time there is a financial crisis or an innovative approach to investing. The result has been landmark laws in 1933, 1934, 1940, 1940, 2002, 2010, and 2012. Then consider the administrative rules and regulations necessary to implement those changes. As a country, we have developed a massive thicket of rules for publicly-traded companies, and then a cluster of exemptions for companies seeking to conduct a private sale of securities.
Just as Captain Louis Renault was shocked, shocked to find out that gambling was happening at Rick’s Café, you too may be shocked to find that a tangled web of SEC rules serve mostly to employ attorneys like me. With our help, clients can avoid making a costly misstep. But even the SEC itself has acknowledged that simplicity is desirable, and earlier this year the commission proposed rule changes to “Harmonize, Simplify and Improve the Exempt Offering Framework.” With all due respect to this good-faith effort, I’m not holding my breath to see if lawyers will be sidelined by its changes.
In 2007, the University of Virginia realized that too many paint layers had accumulated on Beta Bridge, and the right strategy was to peel it all off, right down to the bricks. Of course since then the paint build-up has resumed, but a similar strategy is needed to make it easier for investors to put money into startups. In 2021, Congress and the President should blast off all of the laws and regulations that have fueled attorneys’ retirement plans, and instead embrace an entirely new approach that helps everyone more simply chase their startup dreams.
Many thanks to UVA Today for the information and images of Beta Bridge used above.